August 10 Episode
57:37 Share

Welcome to Money Talks. My name is Mike Campbell. Great show planned for you. It's going to be worth your while. Really looking forward to chatting with Rick Rule, really a legend in the investment markets, but what a week to get him. We've had this huge tumult early in the week. I mean, look at the incredible drops in some of the exchanges around the world, but also, in fact, impacting some of the currencies, etc. I'm going to get his perspective on that.

Also got to check with him on where he stands with the gold and silver part of his portfolio. As I say, a lot of things to get to. Stay with us. Rick Rule's coming. Also going to talk to Victor Adair about that market volatility and Ozzy Jurek about the latest real estate numbers. I think proving out that even a couple of rate cuts, well, clearly hasn't been enough to revive that market. There's a good reason for that. We'll get to it later. But first,

I don't pretend to know the thinking of politicians when it comes to messaging. Not a surprise, given I place a much higher value on integrity than they clearly do. I mean, they are very comfortable with misleading the public with half-truths and at times outright lies. And a constant stream of gaslighting seems to be the norm.

I mean, the response will be that all parties do it. And I think that's accurate. But you know what? Some parties do it a lot more than others to a much greater degree. Personally, I find it disrespectful. But beyond that, I wonder if it's effective in terms of, you know, attracting voters. Or maybe they just do it to, you know, primarily aim at securing their political base. And there's certainly no shortage of partisan apologists ready to support even the most blatant horse manure.

And when it comes to economics, finance, business and other issues, I wonder, you know, I sit there all the time thinking, are really they that unsophisticated? Or maybe they think we are. A couple of weeks ago, finance minister got the goofy award for stating that the Bank of Canada had lowered rates, the first to do so in the G7. Well, that was proof, in her words, the government's economic policies are working.

When the second rate cut happened, the government stated in quotes, "The Bank of Canada just cut interest rates again. We're growing a strong economy that delivers for Canadians."

Say what? Compare that with what the Bank of Canada actually said. Economic growth in Canada, in quotes, remains weak relative to population growth. Household spending, including consumer purchases and housing, has been weak. There are signs of slack in the labour market. Unemployment rate has risen to 6.4%, with employment continuing to grow far more slowly than the labour force, and job seekers are taking longer to find work, end of quote. Bill

Those aren't the same thing. That is not the Bank of Canada describing a strong economy. Well, StatsCan, by the way, just released the latest job report, finds that headline employment rate has dropped a full 0.2 percentage points in each of the last two months.

In July, the private sector lost 42,000 jobs. Youth unemployment, those people aged between 20 and 24, is 11.2%. That's the highest since the depth of the lockdowns in June 2020. I mean, these aren't signs of a strong economy.

Well, neither is the finding of a recent Leger poll that found that more than 50% of Canadians between 18 and 54 say they're living paycheck to paycheck to stay afloat. 37% report borrowing money to pay for daily expenses like food. They have to borrow money just to live. The government also ignored the Bank of Canada's recent warning of declining GDP per capita. They called it an emergency. Well, not to the government of Canada.

Instead of addressing the issue, the government talks about rising GDP, which is a direct result of the population explosion due to increased immigration and what the prime minister himself called out-of-control temporary visas. The Bank of Canada stated that without the population-fueled rise in consumption, our projected GDP growth this year would be slipping below 1%. You know, as the lead editorial in the Globe and Mail stated in the aftermath of the rate cut,

The reason that the bank feels able to cut rates is not because the economy is strong, it's because it's weak. What I don't understand is why the finance minister will say something that is so easily disproved. She knows that the central bank lowers rates because of the growing economic weakness. And it's not an isolated example. I mean, the finance minister and the government do it regularly.

Their constant refrain of, come on, we're building 4 million homes by 2030. Well, it can't be validated in any way. I mean, it's simply not going to happen. And they have to know that given that housing starts are not even at half the rate needed to reach that target. And keep in mind, the number of housing starts needs to grow every month because we have to make up for the shortfalls from previous months. So they just know it isn't true.

I don't know how we can have an informed discussion slash debate on economic and financial issues when the government consistently ignores the current reality. And let's be clear, you know what? This was never an issue for previous liberal finance ministers.

This is a unique characteristic of this government. Past Liberal finance ministers like Paul Martin or John Manley or Bill Morneau, they never gaslit the public like this. They considered the position too important and should stay above the political fray. And why mislead the public? I don't get it. As I asked at the outset, is gaslighting the public effective politically? Well, I can only answer for myself. It sure doesn't work on me.

Hey, just a reminder that wherever you are, you can find us on Mike's Money Talks.ca, and I encourage you to sign up for five minutes with Mike. Absolutely free, by the way. But you can also, of course, join us on Money Talks tweets and I'll call Michael Campbell's Money Talks on Facebook, and I hope you do it. And by the way, I always appreciate when I get a note from someone saying, hey, I recommended it to my friends, et cetera. Yeah, much appreciated your support.

You know, sometimes I get lucky. We book a guest and then all sorts of stuff happens in the marketplace, which is why I'm normally so pleased to talk to Rick Rule. But especially at this time when we've had the level of market turmoil, obviously, we've been experiencing since just over a week ago. Rick, first of all, appreciate you taking the time. I'm sure you're I hope you're not tired of answering questions, but I bet there's been plenty of them.

Well, Mike, thank you for having me back. First of all, I enjoy visiting with your audience. And yes, this is a time where keeping people's attention is pretty easy. Their attention certainly has been aroused by the events of the past week.

Well, I always remind people too, they say, well, I don't own stocks or something like that. And I go, well, actually you do. It's called the Canada pension plan, or it could be in the U S and social security, or you're lucky enough to be part of a private pension plan through your work, et cetera. So yeah, we all are impacted on by this. So that's why I think it's important for people to pay attention to this. Uh,

Obviously, the size of the decline, we've been talking about that. I mean, I'm still, you know, I needed a neck brace after I had a look at what went on in Japan. I guess it was on Monday their time, you know, 12.4%. You know, I looked at their bank stocks, by the way, down 27%. I mean, my goodness gracious. I mean, that was shocking to me, the size of the move that way. But were you surprised by that sort of corrective move? I thought in Japan it had to happen. I didn't know when.

But the Japanese carry trade and in fact, the manipulation of the Japanese, the deliberate manipulation of the Japanese currency lower and the ability to subsidize their banks by allowing them to borrow in Japanese yen in a currency that was depreciating and buy higher yielding assets in a currency that, while it wasn't perhaps appreciating, was appreciating against the Japanese yen in the circumstances had to change.

The aggregate Japanese debt of GDP was also too high to be sustainable, particularly in a world, their world, with very bad pension demographics, many retiring workers, not so many active workers.

My suspicion, by the way, is that the unraveling of the carry trade and the imbalance in the Japanese pension economy isn't over. I'm not so sure that the next adjustment will be as violent. I suspect, though, that this circumstance will continue. And I suspect that

that the circumstance of the declining availability of Japanese capital in outside markets, particularly the US market, is also a trend that hasn't ended. Remember, Mike,

The prices are set on the margin. And if the Japanese institution is three or four percent of the market, but that three or four percent is absent. The fact that prices are set on the margin means that this will continue to act as a drag on asset classes that the Japanese have been active investors in. As an example, the U.S. long bond market.

And there's so many things within that. I want to just go a little bit further. Not everybody's now probably heard that phrase, carry trade, but maybe not quite as sure. But is it right to say the bottom line is I could borrow at basically zero trade?

out of a Japanese bank. I could borrow that money and then I could just place it somewhere else. Maybe that's what fueled Nvidia, for example, or fueled, you know, the big seven stocks or certainly the move in NASDAQ. So, and as you said, maybe more importantly, U.S. bonds. Hey, why not borrow at zero and get three or four, maybe 5% in a U.S. bond? And that seems to be reversing now. Yeah, the bond trade was perceived probably correctly for years as a riskless trade. You

who would borrow money at a nominal yield, 20 basis points in a currency that was declining, and buy 400 or 500 basis points in a currency that at least relative to the end was appreciating. This was a pretty good print. And if you were a Japanese bank, you could do it with no reserve requirement against it, meaning that you didn't have to have an equity loss reserve.

The return on capital employed was infinite because you were using depositor funds, not your own equity to make the trade. It is no surprise that the market capitalization of the Japanese banks, who were so reliant on this carry trade, was as dramatic as it was.

Mm-hmm. Again, so let's talk about the impact of the reversal of that. They raised interest rates. They said, the Bank of Japan, we're not going to buy as many bonds in the next couple of years because remember when they buy bonds, that's what helps keeps the rate down. I mean, no one else wanted those damn bonds, not if you're going to pay me half a percent in an inflation increasing environment. So they were the ones buying. So those two things seems to me the essential part. But

Let's follow through what that meant then or what the reaction was to that. Well, I think one reaction is that there is at least the perception of less liquidity on global markets from Japanese sources, which means the presupposition that there is always a buyer or a plethora of buyers and that one of those buyers is Japanese is out of the market. I think the implication for the U.S. Treasury market is probably negative.

The most important. It increases the possibility that they give a treasury auction because the U.S. funding needs, in particular the rescheduling needs, are pretty acute. And there won't be enough individual or institutional demand to fill the offering. And that they might have to fill the offering with quantitative easing, which means they might have to buy their own paper. Now, Mike, if you did that, it would be called counterfeiting.

If Congress does it, it's called quantitative easing. But the ultimate result, I think, is likely to be the same. The last time we had a failed Treasury auction was in the Clinton administration a very long time ago. And he coined the phrase the bond vigilantes. The bond vigilantes haven't been active in the market for a very long time. But if we begin to assert market pressure on the Treasury market, that'll become a very interesting change.

in financial markets and one that will probably not be pleasant for many participants.

Yeah, to me, that's always been my biggest fear, I say, is liquidity. And one of the things that very simple to understand, no buyers, you know, and we first experienced that. Well, not first experience, I'm sorry, but more recently, September 16th, 2019, when the overnight lending markets said, will you lend me this money? And no, I'm not lending you that money. So literally interest rates, just so people remember, went up 500% that night. Right.

That's when the Federal Reserve stepped in and said, well, we're going to calm that market down. We're going to make sure you can borrow at lower rates. But I think I counted five other times since that.

you know, where the Federal Reserve has stepped in. We know they stepped, you know, the Bank of England stepped in in the UK bond pension crisis, you know. Obviously, again, back to the Federal Reserve, but they were certainly active when we had the Silicon Valley Bank. So it's not unprecedented. And Japan may be the granddaddy of them all. I mean, the Bank of Japan's been involved, you know, for decades now because who the heck wanted those bonds? And Mike, I think that's the lesson for your audience. It isn't over till it's over.

People have seen the writing on the wall with regards to Japanese capital markets for 30 years. And nothing happened and nothing happened and nothing happened. And then when the something happened, it was a pretty ugly trap. I remember myself, frankly, back in 2006, 2007, driving on the freeway and seeing a big sign off to my right that said, borrow 125% of the value of your home. Bad credit. Okay.

If ever there was a warning sign for the 2008 real estate crash, that was it. I noticed it. I remember being a lender thinking bad credit okay was not a good omen, but I didn't pay attention to it. It wasn't until the event occurred that looking in the rearview mirror, I understood that that sign was a wonderful harbinger.

And when we talk about these circumstances that don't make sense to us and we belittle their importance because there isn't historical precedent, we set ourselves up to be victimized by the same trap that you're referring to. I think that's the lesson. I'm not suggesting that your audience, you know, panic and go out and buy ammunition or anything like that.

What I'm asking them to do is take a look at the trends in motion that don't make sense to them from an economic point of view and incorporate the fact that they don't make sense into their own personal financial planning.

I think that is a brilliant point. You know, I mean, one of the challenges, in fact, you know, on this Japanese carry trade issue before it happened just recently, though, I put something up as you should be paying attention to this, but you won't. And it was about the carry trade and the dangers there. But again,

You've just expressed it better than I did. And that would be my message, too, though. I just want to echo it. There's all sorts of signs and even stuff that makes sense to us. You know what I mean? Yeah, that's probably not a good idea to have $91 trillion in debt and pretend it's not there. You know, it's probably not a good idea in the U.S. to have, what is it, 122% debt.

you know, entitlement payments and defense and interest, you know, debt to GDP at 122%. You know, those kinds of numbers come at us and we're well aware of them. And I, yeah, I, the complacency around them is what blows me away. I think that's important. People look at the fact that we got through 2008. Okay. We got through 1997. Okay.

It's important to remember that the circumstance in 2008 happened with government debt to GDP at between 22 and 25%. In other words, there was plenty of string to push on with quantitative easing. There was plenty of faith in the U.S. Treasury market. There was plenty of faith in the strength of the U.S. government to muscle its way out of its own stupidity. With debt at 120% of GDP,

there's much less strength to push on. And so the fact that we got through it unscathed last time is not necessarily indicative of the stress that would be caused would that circumstance reoccur. Again, I'm not suggesting that people curl up in fetal position and moan about the hopelessness of the situation. All I'm asking people to do is to structure their portfolio in a way that's somewhat less

anti-fragile or somewhat less fragile, pardon me, than it is today.

And that brings me to gold in this way, because the way they've handled those situations has continued the devaluation of the purchasing power. You know, so I and I'm not so sure people weren't hurt. I think the people making the decisions weren't. I don't think anybody at the Fed was hurt in 2002, 2008, you know, and we can keep going. And I think half the population doesn't seem to be too hurt by what they've been doing so far. But I sure worry about that other half.

You know, it's real. They don't own assets. So they didn't benefit in any way from the sort of really loose monetary policy. And I'm not here to debate that specifically coming out of the pandemic. The fact is, though, you had about a 40% increase in money supply. You know, we know that devalues and what you're describing here would devalue the currency further. And I just worry about that.

you know, that half of the population that I continue, just as me, I'm not putting words in your mouth, but we ignore them. They're not happening. I worry about both halves of the population. Yeah, fair enough. When I talk to a Vancouver audience, one of the things I'm struck with, particularly among people younger than I, which is most of the population, sadly, they say real estate prices in Vancouver can never go down. I lived in Vancouver in 1982 when the real estate price fell by half. If you had a five-year mortgage,

based on 1980 prices and you went to refinance that mortgage after five years and you found that the value of your house fell by half when you had a 75% first, you had a problem. It isn't just the poor people. If you have people pick a city, I'm picking on Vancouver because your audience is largely lower mainland centric, but you have a solvent audience that has learned the lesson in the period 1982 to 2002

that blue chip stocks only go up or that bank stocks only go up or that interest rates only go lower and so bond prices only go up, I suggest that you revisit your paradigm. There are a lot of people who have bought the so-called Magnificent Seven in the United States because the price appreciates. And I ask them to describe what they think the business is worth, what the value of the business is, and they revert to the share price.

The price of something is markedly different than the value. And I would argue that money is made over time by understanding the discrepancy between price and value. That price information is of no use if you don't have an opinion as to value. And there are a lot of investors, a lot of people who listen to your show to get ahead that need to revisit in their own mind

the difference between price and value and understand the risk of investing in asset classes that you don't actually understand. Again, another great point. I mean, I'm always talking about there's the narrative and then the price you put on the narrative. And when you get these major corrections and I'm not, you know, and there's still many variables to play out. I think you don't have a huge down couple of days the way we did, you know, whether it's Thursday, Friday of a week ago, you know, Monday, you don't get that without a lot of up and down.

I mean, I think the VIX index was indicating volatility in the extreme. You know, I think that's going to be accurate. Don't be surprised by up moves. Don't be surprised by down moves. But I love that point. You come back when you're long term and you're setting back. You know, FOMO doesn't do you any good. Fear of missing out. But what does is recognizing that difference, recognizing the value compared to the price. And I just think we should put that on a sign and sell them.

because I certainly made that mistake in the past. What I love about these tumultuous days is that the selling is reflexive, which is to say often the sale decision is made by the investor, but rather by the margin clerk. And he or she doesn't care as long as it has a bid. And what that means is that high quality assets get thrown out with low quality assets. And the discriminating shopper, I view myself as one of those. And occasionally that's right.

has the ability to look at his or her shopping list, and if they have the courage on these tumultuous days, generates some real bargains. You know, Mike, one of the other things that amuses me is when folks go out looking to buy physical goods, they're often fairly good shoppers.

You go to a store, you buy tuna fish when it's on sale. You substitute tuna fish for salmon or chicken. You go to buy a winter coat. If it's on sale for 50% off, you're delighted. But when people buy financial assets, they want that coat to be marked up. They want momentum in the trade, which is really profoundly stupid. Yeah.

I want to come to, I don't want to run out of time without talking about silver, without talking about gold, but gold especially. I mean, you're well known through the resource sector, through the public investment thing and through your seminars. And in a moment, I'm going to tell people about a really interesting seminar that you're about to do that I think people are going to be very interested in. But it's, again, to me, there's nothing I've seen in this last little bit that discourages me from my

quotes, pro-gold view, you know, that you should have a portion of your portfolio that guards against the depreciation of the paper currencies that, you know, tumultuous times, et cetera, et cetera. I thought gold performed very well in those several days that were wild. It is not uncommon in real liquidity driven sell offs for gold and silver immediately to sell off. When there's no liquidity, there's no liquidity.

And the margin clerk sells what has a bid and gold always has a bid. So it's important to note that. But what you suggest is exactly correct. The policy response to a liquidity squeeze is to add liquidity, to debase the currency. And that's always good for gold. Rick, let me just go further. You know, as I say, I thought gold performed well.

Again, silver, another one, other sort of hard assets like that. And I've got to follow up in a second, but just to follow on from what you're just saying. I mean, again, we're back to liquidity, which I think is the key component here. For myself, I consider gold to be part of my liquidity, volatile liquidity to be sure, but non-correlated liquidity. It's interesting, Mike, people often say to me, well, when's the gold price going to move? And I have to say to them, well, from my point of view, 2000.

the gold price was at 256 bucks now it's at 2400. it's generated an 8.4 compound per you know internal rate of return for 24 years uh it's on precisely what i asked it to do uh i think what people are asking is when might they expect dramatic price performance uh and i would suggest as i've suggested in other interviews that you and i have done that that will require a real diminishment of the faith

uh in fiat currency denominated savings products and i think that faith is real uh i just don't think it's widely placed uh in the decade 19 well not the decade in the period 1967 to 1972 the hallmarks of inflation particularly relative to the interest paid on savings products were throughout the market and people talked about inflation

But it took five years of experiencing price increases relative to wage, salary and savings increases before the concern around inflation and hence the fondness for gold took hold. When it did take hold, remember, Mike, the decade of the 70s was truly spectacular. And I'm afraid that's the best word that passed in this case's prologue.

I'm with you, though. I mean, gold has had a wonderful, nice, solid up move. You know, if you're sort of an aggressive trader, maybe it didn't do what you wanted. But I think it's doing exactly as you described. It's provided that counterbalance to the depreciation of the purchasing power of our currencies. And silver, I think, has got more room to run, you know, in the same vein. But let me ask you about one, just about how you'd play it.

I like copper for all the reasons, you know, people have been talking about shortage, expensive to get, you know, demand, especially with renewable energy, et cetera, et cetera. Well, it's had a nice little price drop. How do you look at that? Do you look at that and say, great, finally, I got a buying opportunity at a price I can live with. The stories, going back to what we said earlier, the story's a lot more reasonable at that price. People should buy the exposures that they can afford. If we have a circumstance and we could, I'm not an economist,

but if we have a circumstance where we have a synchronized global recession, demand for copper will fall. Irrespective of what we do, supply is going to fall because we've underinvested in copper for 30 years. I'm a five or 10 year player. So the fact that we're going to have supply shortages in the face of ultimately inexorably increasing demand means to me that it's a wonderful investment, but I invest an amount of money

that if it falls in two years or three years, doesn't present any particular difficulty for me. Too often, Mike, investors who believe they're investing in a long-term theme employ short-term strategies, and that guarantees a loss. If you are investing in copper because you know that a billion people on Earth have no access to primary electricity, and they will have it, and that will require more copper,

but copper supplies are falling. That's a five-year thesis. If you're the kind of person who has trauma holding stock over a long weekend, it's going to be very difficult for you to take advantage of that thesis given your time orientation. And I think that people need to do a better job synchronizing their own wants and needs with the realities of the narrative of the markets that they're trying to pay attention to.

I'm a big copper bull and I look at the decline in copper prices and the concomitant decline in the prices of copper equities as a gift.

Let me, before I let you go, and this is the kind of thing that you're doing in rural investment media, but also you run a whole bunch of seminars and you've got a new boot camp coming up. And sorry, I don't want to just spring this on you, but well, you know, you're doing it August 24th. That's not springing anything on you, but you're looking at, because I get these kinds of questions and you get a chance to do that in depth over like a six hour period to share, you know, over 50 years of market experience.

but you're doing it on how to buy a private placement, which I just think is a fascinating subject, especially for people interested in mining, as an example, or some aspect of it. So tell me what you'll do with that seminar. Yeah, I need to say four times a year we do a deep dive on a topic. And Mike, these aren't entertainment products. We work here really hard for eight hours, and we give you access to the recordings for a year, which is really what it takes. We're going to give you more information in eight hours than you can absorb online.

Assuming that you work hard, we did uranium, we did silver, we did prospect generators, we did royalty and streaming. We've done a lot of things. This time we're doing private placements because we think that the market, the ability to transfer information to investors from equities is beginning to become very inefficient. And we think that there is a lot of opportunity in private placements, both debt and equity. Yeah.

In sub-300 or 500 million market caps, we think for accredited investors, we define accredited as investors with a million dollars or more in a portfolio, although the Canadian rules are somewhat less strict, is particularly attractive. But we find knowledge around how to do private placements, how to structure private placements, in particular knowledge around debt private placements, which I think on a risk-adjusted

framework are more attractive than equity private placements. We think that this is the area where the sophisticated investor is the least sophisticated relative to the opportunity in place. So we're going to spend eight hours talking about pre-public investment, private company investment, pipe investment, which is a public investment in, pardon me, private investment in public equities.

We're going to talk a lot about debt and convertible preferred placements, which we think is very, very, very attractive. We're going to charge $99 for it. Like all of the investment products that we've offered for the last 28 years, if you don't think you've got your money's worth, just email us. We'll give you your money back. There's an absolute gold-plated money-back guarantee. Well, let me just say this. That is ridiculously inexpensive.

And I'm serious. You know, I think I'm older than you are, Rick, just so you know. I've been around and done lots of seminars myself, you know, and attended. And I can't tell you, eight hours of info at that level, accumulation of 50 years of experience, you know, the ups, the downs, the all arounds. And as you say, the opportunity for $99, that's ridiculous. But great for my audience. So thank you. Yeah. Fully refundable if you don't get your money's worth.

Well, I'll just tell it right now that people just go to Mike's money talks.ca. We'll put it on all our social media. We'll put it. You'll be able to sign up right on Mike's money talks.ca. As I say, we'll get more information, but Rick, I, that does absolutely sounds fabulous. And I can't believe the price as you kind of get, you probably sussed out from what I'm saying here. And I have another offering. I have another offering, Mike, you'll like even more because it's free. Any of your audience who cares what I have to say about natural resource investments can personalize it.

Go to RuralInvestmentMedia.com, list your natural resource stocks, and I personally will rank them 1 to 10, 1 being best, 10 being worst. I'll comment on individual issues if I think my comments are worth commenting on, and that's absolutely free, no obligation. RuralInvestmentMedia.com. RuralInvestmentMedia.com. Again, I'll put that up on our socials, and I'll put it on our site, etc. But yeah, that's a hell of a deal too. I mean, I'll send you mine.

I'm being serious. I'd love to get your take on what we're doing here. I mean, you can tell we're certainly aligned in what the challenges are, and I'd love to get your take after years of making those investments. But yeah, I'll just remind, August 24th, take advantage of that. Just period. Take advantage of that. Rick, thank you so much for finding time. You know we appreciate it here. And really, real, I mean, I'm not the cliche. These are pearls of wisdom that people should take advantage of. I love the reminders for myself. So thanks, Rick.

I look forward to continuing them online, and I look forward to seeing you perhaps in Vancouver at Jay Martin's conference or whenever the next time I can catch sight of you in person. Great stuff. Thanks, Rick.

The Western Canada Monthly Income Fund is starting pre-sales on its new project called Portal. This waterfront development in Maple Ridge is expected to sell out quickly. The fund is making limited amounts of investment available. If you're looking for a secure investment in real estate and relatively quick turnaround, what would be better than using your RRSP and TFSA to help build much-needed homes for Canadians? It's common sense investing. The

Established in 2018, the fund pays a monthly fixed target interest plus a generous participating profit share. Request your investor package today at easy-invest.ca. That's easy-invest.ca. Conditions apply. Past results are no guarantee for future results. Check the website for details.

Time now for the quote of the week, and it's especially pertinent in light of the violent clashes we've seen in Britain. You know, the mobs of weapon-wielding pro-Hamas gangs meeting anti-immigration mobs. Well, similar violent clashes are happening all over Europe and even in Canada.

But the cancellation of Taylor Swift concerts, another example in Vienna, in case you missed it, over Islamic State-inspired terrorist threats, along with protests in other Western countries, including Canada. I mean, this week, Columbia University's Students for Justice in Palestine put up posters announcing they were, in quotes, fighting for the total eradication of Western civilization.

At UVic, the Muslim Student Association advertised an upcoming event where this Saudi scholar is speaking about how in the next 40 to 50 years when Muslims become strong, they will kill slash enslave the infidels who refuse to convert or pay a tax.

Which brings me to the quote of the week by well-known Canadian academic, best-selling author of The Parasitic Mind, Gad Saad. In quotes, What you are seeing in Britain is precisely what I've been warning about for decades. It's not rocket science. If you take two cultures that are fundamentally antithetical to each other, you'll eventually find out that progressives' coexistence is not going to work well. There is 1,400 years of unbelievably clear data that Westerners are choosing to ignore.

I want to bring Mike Levy in now. You know, kind of interesting having that chat with Rick Rule, Mike, you know, chronicling these markets and, you know, market watchers like yourself, Victor will certainly chime in in a few minutes. We also have, of course, hearing from Rick. It's just interesting that level of volatility. But let me just throw something at you. My goodness, it's just a reminder how fast the world changes. Like the whole conversation has changed in the last 10 days, let's say, maybe even a week.

That's what I think is noteworthy for everybody. They'll tell you something's going to happen. Just be aware it might not and may go the other direction. Well, I've got to tell you, the rule that we're talking about is SOM's rule. That's Claudia SOM. She was a former Fed Reserve official in the United States.

This is the rule as she sees it. A recession is already underway if the unemployment rate's three-month moving average rises half a percentage point from its low of the past year. Well, Mike, the U.S. jobless rate jumped to 4.3%. That was the last straw. Last Friday, that threshold was crossed, and SOM's rule has now come into effect.

Yeah, and that's what everybody started to talk about, you know, after that jobs report coming out of the U.S. that started the market weakness. And it was really the pace of change. And I just reiterate what you're saying is that the indicator has been a reliable sort of short-term indicator of recession. And that's got a lot of implications, I mean, for investors especially. Oh, yeah.

Mike, it really does. And this is the last half century it has kept to this rule. It hasn't very in the reaction to the rule. But just listen to this.

you take a look at the change in percentage after the rule comes into effect the S&P 500 in the US down eight and a half percent TSX down ten and a half percent you've got oil down 13 and a half percent copper down 4.8 percent you've got um

Gold being the only one that went the other way. All these other investment venues went down. Gold was up 2.9%. That's not to say it's going to be the same this time because...

You can't guarantee, but you've got to look at past performance. Yeah, and the indicator is very straightforward. We don't all have to become economists. We just have to know that really the measure is the economy is getting weaker. And then that translates into interest rate fluctuations.

You know, and I smile when I think of the interest rate forecast, how they've been up, down, all around. And we've said it from the beginning. You know, we went from 712 reductions in interest rate. No, it wasn't. But it was, you know, six or seven interest rate decline if we talked in January. Markets told us, you know, that was dropping really almost to zero or one by we came into the summer months. Now we're back up again.

But Mike, this is just a week or 10 days. The Fed was out. They're not going to lower rates. They're going to take a look at doing it in September. And all of a sudden,

because of the implications of what happened in the markets and this Psalm rule again, US markets are now pricing in a really strong chance of one and a quarter percent rate cuts between now and year end. Mike, that was zero last time we talked. Now one and a quarter. That's five quarter point cuts or maybe even less.

even a half point cut, but that's what they're pricing in. But let's look at the Bank of Canada. They've been on a steady course, Mike. They did not step aside as the United States did. They already were dovish. They've already acted. This is just going to help to confirm their dovish stance. And that could give the Bank of Canada the ability to act more aggressively. And I add my point

They have to act more aggressively because our economy here in Canada is nowhere near how the economy in the U.S. is performing.

Yeah, lots about that. I mean, I'm just smiling thinking of, you know, I'm calling it the money talks grain of salt rule. And that's when we hear from the analysts and all that. And I'm not knocking them, really. I mean, they're trying to predict the future. But whenever you hear these broad or bold forecasts, like we're going to lower rates, I think it was seven times, actually, you know, when we went back to January.

et cetera, et cetera. Just remember, a grain of salt, it's a very complicated system they're trying to evaluate. Same with governments. Governments don't admit they can't, but at least analysts will say that. But it's just a reminder, that level of change and volatility, Mike. So, and of course, hey, the good news, you'll be here to talk about it. I will, Mike, but I just want our listener to understand

understand that things have changed so much in 10 days, but make no mistake about it. Rates are coming down and Canada is already on that path. U.S. is playing catch up. Well, we'll get the inflation numbers for July. I think we get them August 20th. The bank meets September 4th. And consensus again, although I'm worried about consensus, but the consensus is, yes, we will get the lower rate. Mike, have a great week. Thanks, Mike. You also.

Time now for the shocking stat of the week.

you know immigration is a big topic of conversation these days but one of the myths surrounding it is that more immigration will build a bigger workforce and fill labor shortages i mean that used to be the main goal by the way of canada's immigration system not exclusively but it was a big time part the biggest part but as waterloo's uh mikhail scutrude wrote recently in the globe and mail i mean we were once the envy of the world but canada's immigration system now lies dismantled but

But why? I'll tell you why. Because Canada abandoned the point system. That point system was based on work experience, education, work skills, language. We abandoned it in 2019.

Well, I don't think it takes much thought to understand that the impact on Canada's productivity or GDP per capita, well, it depends on who's actually coming to Canada. And that's what I want to bring to your attention. I was shocked at the degree that's changed. I mean, we know that immigration is up probably 65% above the historic norms. But that again, those admissions were based on the economic stream of those skills, of the language, work experience. Well, that's changed dramatically.

In 2019, roughly 46% of economic immigrants were selected through that federal point system. Up till then, that's changed dramatically. About 46%, as I say, were chosen on that regard. Well, now, by 2026, I was shocked to find that the number is going to drop to only 8%. And with it, the positive long-term impact on the economy will fall too.

More changes in the real estate market. We also got the July numbers. I want to bring Ozzy Jurek in to chat about this. Plus, I want to ask him about mortgage rates too. But Ozzy, let me just start with the numbers. It looks like the trends that we've been experiencing, you know, May and June continued through July. Yeah, and it's well set right across Canada. In a nutshell, sales are still well below the 10-year average with some minor exemptions.

Active listings are rising right toward Canada. Active listings, Mike, are the listings at the end of the month, anything that's for sale, new or listings that have been for sale. But that active listing number is important because if it's rising, that means there's more product out there. And generally down the road, that has a change on prices as well. So if we look at Toronto, for instance, the average price on a...

year-to-date basis is about the same but over the months it's down five percent over june active listings at 23 800 is 55 increase now the interesting thing here is that that is the highest number of active listings in 14 years in toronto for the months of july so sales are down some 13 over june but up year over year so it is uh

One of the things we don't report are pre-sales and apparently there's a lot of pre-sales on the market in Toronto as they are in Vancouver, but they're not covered. So generally sales are down. Calgary active listings rose to 4,100. It's not a record of any kind, but it is the highest number over 4,000 units in the last three years. Sales are down about 10%, but prices, Mike, 11% higher for a single family home.

and 17% higher on the marvelous price of a condo in Calgary at $346,000. So, as I said, trends that are continuing. I mean, that's the most positive market in terms of higher prices, not for buyers, but for people who own and are sellers. That looks like the strongest market in the country. Let's go right to the coast and what's going on in B.C.?

Well, in Vancouver, single-family prices dropped from the June price by some 11% from $2.3 million for single-family home, believe it or not, to $2.1 million. The active listings, which again, unsold at the end of July, are much higher at 24%, and condos' active listings are up 38%. So we have about the same picture right across the country. Where the difference lies, when you look at Calgary's average prices, they're more like American prices.

Like in America, a single family home is under half a million dollars right across the board and condos are under 300,000. If there is a major calamity in the world, Mike, that's what I worry about. We in Canada and place like Australia, we're just too high. I mean, how can the average price be 2.3 million for a house?

Well, we're going to find out if that can maintain. That's what I think is so interesting is that, you know, if somebody's got their active listing, you know, and they've been on the market a few months and they feel like they want to sell, well, they're going to have to lower price to meet demand. Maybe they're hoping that this next interest rate cut will spur people, but let's face it, the first two haven't. And I think they're up against psychology that, you know, it's a more bearish idea.

when you're looking other than in Alberta, other than looking at Calgary. It's a bearish tone, and two quarter point cuts aren't enough. Although, Ozzy, I see the mortgage rates, though, are responding already, especially to anticipation there's going to be one more cut coming up in September. So at least mortgages are more attractive. Well, when you take a look, anything below 5% historically is a good rate for a five-year term. And I've seen mortgages now as low as 4.3%. 4.3% for a five-year fixed term?

I mean, if you can't afford that, then you shouldn't be buying that house, you know, because I don't see them going that much lower. Well, let's and let me just finish with this also. I mean, one of my complaints has been government's grandstanding about they want more supply and then they turn around depending what province, but federally too. And you look at, you know, sort of the level of levies and taxation, regulatory costs. And another is these regulations, you know, discourage. And I saw that the B.C. government, by the way, backed off.

a couple of theirs like the tenant eviction has changed that kind of thing shocking they never talked to the development industry beforehand but now it looks like they have because there's a lot of blowback can you sort of elaborate on that for us yeah the peace real estate institute and the mortgage broker association and others just pointed out that if you give four months notice to a tenant and he then has 30 days to to dispute this

that five months period, how are you ever going to sell it to a first time buyer? Because the first time buyer needs CMHC insurance and CMHC wants the property to be vacant upon possession. Well, how can you guarantee that with those kinds of terms? You don't simply don't have the time. The mortgage approval might've expired. Anyways, to the credit of the BC government, they made the change right away. And we now have a three months time period for the notice. And the dispute period is not 30 days, but 21 days. It's,

It's a thin edge of the wedge, hopefully, for some of the other changes that the industry was looking for. Well, I've got to say, though, I'm not going to let them get away with not consulting with the industry before they put that in. And that's been typical also at the federal level where I've seen, you know, these whatever these housing issues.

groups that they've got together. I forget what they call them, but a housing committee. And I said, you know, you think you would have had a developer involved with that? Not just academics or, you know, policy wonks, you know, you should talk to the people who are actually building because clearly whatever they're doing across the country isn't working with the decline in housing starts being miles away from what they told us they needed to suit a hit as targets, you know, to meet the population increase. But I

Again, that's me because I'm grumpier than you are, Ozzy. Ozzy, you go out. You live a fine life. You go out and have a terrific week. Well, thank you, Mike. It's a summertime, so the ocean is beckoning. Well, I always liked Red Skelton, Mike, and he's sort of my favorite, although it's not necessarily my wife's favorite when I use some of his quotes.

But he has this great quote about his wife. He said, she ran after the garbage truck yelling, am I too late for the garbage? Am I too late for the garbage? And the driver said, no, jump in. I just love how Ozzy lives on the edge with that one. His wife, Jo, is obviously more patient than some of us are used to. Ozzy, have a great week. And you and your listeners, too. It's summertime.

Let's go live to the trading desk. Let's see how Victor Adair survived quite a week, eh, Victor? I mean, we were actually calling, and you were calling for, since the July 11th, you said it might be a big turn point, certainly look for more volatility. Well, we certainly got that, but man, some of those moves, I think it's important to actually appreciate how abrupt and how extreme some of the moves were.

Mike, if we go back to early July, I felt at the time that the markets were complacent. Big cap tech was driving the rally and this and that and like nothing could go wrong. It's a layup. You just buy whatever and it's going to go up.

And then things started to change. And the turn date we talked about last week on July 11, when the U.S. issued their CPI report, it was a little softer than expected. And I remember that day the NASDAQ traded up to new all-time highs, as did the Nikkei index.

and then turned lower. Not a big deal, but that was kind of the turn. And the real turn that day was the Japanese yen. The authorities had come in, started to intervene because the market was at a 35-year low, and the yen rally caught fire. I guess over the last month or so, we've rallied about 14%, which is a huge move in the world of currencies. Yeah.

And I think we've talked about this before, what we call the yen carry trade, where you borrow money in yen, let's see it next to nothing and invest it in other stuff. In my blog, I've written a lot about people that borrowed yen and invested the money in Mexico where you got 11% for, you know, T-bills. Anyhow, we got this, this phenomenon.

Thing that happened where the market went from being complacent at all-time highs, it started to come down, people started to worry, and then we had some dramatic drops. Like the Nikkei, they call it the Dow Jones, Japanese Dow Jones, it was down over 20% in three days as we came into Monday.

So, you know, we went from complacent to concerned to, oh, my God, what's going on? And here at the end of the week, you know, things have quieted down. But we had such a spike in volatility. It was just, I mean, we went from this complacent levels to the most worried, as it were, in terms of vol, what we've seen since the COVID panic. If I could give you an example, Mike, on the vol explosion, I own some gold puts.

The price of gold didn't change much, but the vol spiked and the value of my puts doubled. And I said, I got to take this. Sold. Well, let me just make sure we're all on board. So you bought a put because you were protecting against gold going down. As you say, it didn't. But let me put it this way, Vic, is that the psychology changed so dramatically, the worth of that insurance policy went way up, despite the fact gold didn't do much. And that just showed you how the psychological shift happened.

Yeah, I think what I'd like to get to here is what I call positioning. And we've talked about this before in the show. At the beginning of July, like I said, everybody in his dog was long. And, you know, because the market had been plodding basically higher since October of last year, people had just thought, hey –

The thing only goes up. So the positioning was such that when a turn happened, people who were really aggressive had to start selling. And that caused people who were less aggressive to have to start selling and so on. We call it selling begets selling, particularly when you get margin calls and people are in there with leverage and markets are moving fast.

Well, to that end, I want to finish off with the Canadian dollar because as you've been describing for a while for us, the Canadian dollar has this massive position on playing it to go down over the last six months. Give me a comment on that. Well, the Canadian dollar has been –

a playground, I guess, for the speculators. They have been pressing the short side and the Canadian dollar is kind of grudgingly gone down. I think this week we had a spike low on Monday, the panic day, where we traded certainly to a 20-month low and nearly a four-year low.

But then the Canadian has turned around, like the stock market turned around from Monday's lows as well. Here's the thing for me. When I see that the speculators are massively short and then we get a turnaround like we had this week, the Canadian dollar rallied back.

I'm thinking now, if I was one of those guys, I might go, hmm, I wonder if I really want to keep this position on. Maybe I should get out. If they want to get out, they have to become buyers. And if some of them start to become buyers, like happened in the end, everybody and his dog was short the yen. And as it started the rally,

the people that were all that keen in the position started to get out, and that caused other people to get out, and the yen had a great run to the upside. I'm not saying that's going to happen in Canada, but it could.

Yeah, it's obviously something to keep an eye on. And let me finish with one last thing. You know, again, I'm not going to get you to, you know, shine the crystal ball specifically on the broad thing. But here's the other thing that you've talked about for years, which we're entering the dog days of August coming up, you know, where volumes are going to shrink. You know, the impact of that could be dramatic in some areas of the market.

Yeah, I think we're already there. I think part of the drama we've seen here this week is because of the lack of liquidity. I think I said earlier, Gartman used to say, hey, it's August. You know, the adults have left the room. It's just the kids on the trading desk.

But I really do think, Mike, that this panic that we've had is going to reduce people's willingness to get aggressively involved in the market. So, you know, we'll see where we go from here. It looks like we've made a turn, at least in terms of psychology this week. But, you know, yeah, the dog days of August are going to be with us for another two weeks yet.

Well, they can check it out because, of course, you're monitoring it on a daily, hourly basis, even more than that. But, of course, we'll post on victoradair.ca. victoradair.ca. Get your latest stuff. In the meantime, Vic, yeah, we're in the dog days. Go out and enjoy them. Poof, poof.

Time now for this week's Goofy Award. And for it, we're going to revisit one of the best examples, I think, of green virtue signaling in the name of climate change. If you search Canada's 2 billion tree program, you get over 4,350,000 hits on Yahoo. I mean, the promise was to plant 2 billion trees made by the prime minister during the 2019 federal election.

with the Prime Minister claiming it was an important part of Canada's effort to fight climate change. Now, typically, as with all climate initiatives, anyone who questioned the commitment was attacked. Even two years later, when it was pointed out not a single tree had been planted, no, you're in trouble for pointing that out.

And last fall, when the government admitted, no, it was going to fall far short of its target of 2 billion trees by 2030. Well, the criticism was dismissed. So it's going to be interesting to see the reaction to this one with this week's goofy award as

As Black Locks reports, the Canadian Meteorological Society and the Ocean Graphics Society says the program was overrated from the start. Far more wishful thinking and political grandstanding than reality. It stated, this program is overrated as a means to fight climate change, especially the government's intention to help counter carbon emissions.

It would take 10 billion mature trees, 50 to 100 years, not new seedlings, to sequester Canada's 730 million tons of annual carbon emissions.

My goodness. In other words, the program could never do what the government promised. It was not based on science. Typically, it was about politics, not climate change. But what's really goofy is how many in the media and the public mindlessly accepted the government's talking points. Like so many other climate policies, the $2 billion tree planting program was accepted without critical evaluation.

Because the cost of questioning any aspect of climate change is too high in terms of personal attacks and professional reputation. But you know, one aspect that's always puzzled me is why people who sincerely care about climate change don't demand the most effective, practical, workable solutions to address what they tell us is an emergency. And instead, they accept political grandstanding and virtue signaling.

Hey, just a reminder, by the way, you can always join us at Michael Campbell's Money Talks on Facebook. You can join us on Money Talks tweets, and I really encourage you to do it. I'd also tell you to go to Mike's Money Talks dot C-A. But I want to also give you this reminder. If you heard the Rick Rule interview, I think you'll be very interested in his private placement boot camp. That's coming up. We're going to put all the details on our sites.

But yeah, that sounds like a heck of a deal. $99, are you kidding me? To get what? He said eight hours. Plus you get access to the archive of that. Yeah, good stuff. If you're interested in the gold market, looking in private placements, make sure you take advantage of that. And in the meantime, I hope you have a terrific week.